00 HOUSE BILL NO. 470 01 "An Act relating to the taxation of income." 02 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 03 * Section 1. AS 43.20.011 is amended by adding new subsections to read: 04 (g) For each taxable year or fractional part of a taxable year after 05 December 31, 2004, there is imposed a tax upon the taxable income of every resident, 06 nonresident, and part-year resident individual and fiduciary of the state. The tax 07 imposed by this subsection is determined as a percentage of the taxpayer's entire 08 federal income tax liability, except that the tax on a nonresident or part-year resident 09 individual or fiduciary is the tax determined as a percentage of the taxpayer's entire 10 federal income tax liability multiplied by a fraction the numerator of which is the 11 taxpayer's taxable income from sources in the state and the denominator of which is 12 the taxpayer's taxable income from all sources. The tax is determined as follows: 13 (1) for the taxable year after December 31, 2004, and through 14 December 31, 2005, 15 if the taxpayer's entire federal then the tax, as a percentage 01 income tax liability is: of the taxpayer's entire federal 02 income tax liability, is: 03 not more than $20,000 5 percent 04 over $20,000 10 percent; 05 (2) for the taxable year after December 31, 2005, and through 06 December 31, 2006, 07 if the taxpayer's entire federal then the tax, as a percentage 08 income tax liability is: of the taxpayer's entire federal 09 income tax liability, is: 10 not more than $20,000 10 percent 11 over $20,000 15 percent; and 12 (3) for each taxable year beginning after December 31, 2006, 13 if the taxpayer's entire federal then the tax, as a percentage 14 income tax liability is: of the taxpayer's entire federal 15 income tax liability, is: 16 not more than $20,000 15 percent 17 over $20,000 20 percent. 18 (h) An individual shall determine the tax under (g) of this section using the 19 same filing status as used on the individual's federal return. 20 * Sec. 2. AS 43.20.030(a) is amended to read: 21 (a) An individual, fiduciary, [IF A] corporation, or [A] partnership that has a 22 corporation as a partner, that is subject to the tax imposed in AS 43.20.011 and is 23 required to make a return under the provisions of 26 U.S.C. ( [THE] Internal Revenue 24 Code), [IT] shall file with the department [, WITHIN 30 DAYS AFTER THE 25 FEDERAL RETURN IS REQUIRED TO BE FILED,] a return setting out 26 (1) the amount of tax due under this chapter, less allowable credits 27 and payments claimed against the tax; and 28 (2) other information for the purpose of carrying out the provisions of 29 this chapter that the department requires. 30 * Sec. 3. AS 43.20.030(c) is amended to read: 31 (c) The [NOTWITHSTANDING (a) OF THIS SECTION, THE] total amount 01 of tax imposed by this chapter is due and payable to the department at the same time 02 and in the same manner as the tax payable to the United States Internal Revenue 03 Service. 04 * Sec. 4. AS 43.20.030(d) is amended to read: 05 (d) A taxpayer [, UPON REQUEST BY THE DEPARTMENT,] shall file 06 with the return [FURNISH TO THE DEPARTMENT] a [TRUE AND] correct copy 07 of the taxpayer's tax return [WHICH THE TAXPAYER HAS] filed with the United 08 States Internal Revenue Service for the taxable year. Every taxpayer shall file an 09 amended return with the department and remit any additional tax and interest 10 due [NOTIFY THE DEPARTMENT IN WRITING OF ANY ALTERATION IN, OR 11 MODIFICATION OF, THE TAXPAYER'S FEDERAL INCOME TAX RETURN 12 AND OF A RECOMPUTATION OF TAX OR DETERMINATION OF 13 DEFICIENCY, WHETHER WITH OR WITHOUT ASSESSMENT. A FULL 14 STATEMENT OF THE FACTS MUST ACCOMPANY THIS NOTICE. THE 15 NOTICE SHALL BE FILED] within 60 days after the final determination of the 16 taxpayer's federal tax liability [MODIFICATION, RECOMPUTATION OR 17 DEFICIENCY, AND THE TAXPAYER SHALL PAY THE ADDITIONAL TAX OR 18 PENALTY UNDER THIS CHAPTER]. For purposes of this section, a final 19 determination means [SHALL MEAN] the time that an amended federal return is 20 filed or the date a federal [A NOTICE OF DEFICIENCY OR AN] assessment is 21 made [MAILED TO THE TAXPAYER BY THE INTERNAL REVENUE 22 SERVICE, EXCEPT THAT IN NO EVENT WILL THERE BE A FINAL 23 DETERMINATION FOR PURPOSES OF THIS SECTION UNTIL THE 24 TAXPAYER HAS EXHAUSTED RIGHTS OF APPEAL UNDER FEDERAL 25 LAW]. 26 * Sec. 5. AS 43.20 is amended by adding a new section to read: 27 Sec. 43.20.032. Tax calculation for nonresidents and part-year residents 28 and fiduciaries. (a) In computing the tax under AS 43.20.011(g) of a nonresident or 29 a part-year resident individual, or a fiduciary, the part of the taxpayer's taxable income 30 attributable to sources in the state is determined under AS 43.20.040. 31 (b) In computing the taxpayer's taxable income attributable to sources in the 01 state for a nonresident or a part-year resident individual, or a fiduciary, deductions and 02 adjustments are allowed only to the extent that they are connected with income that 03 arises from sources in the state or property having a situs for taxation in the state. 04 * Sec. 6. AS 43.20.040(b) is amended to read: 05 (b) In this section, income is from a source having a taxable or business situs 06 in the state if it is derived from 07 (1) owning or operating business facilities or property in the state; 08 (2) conducting business, farming, or fishing operations in the state; 09 (3) [REPEALED 10 (4)] a partnership that [WHICH] transacts business in the state; 11 (4) [(5)] a corporation that [WHICH] transacts business in the state 12 and that [WHICH] has elected to file federal returns under 26 U.S.C. 1361 - 1379 13 (Subtitle A, Ch. 1S, Internal Revenue Code) [SUBCHAPTER S OF THE 14 INTERNAL REVENUE CODE]; 15 (5) [(6) REPEALED 16 (7)] engaging in any other activity from which income is received, 17 realized, or derived in the state; 18 (6) working for salary or wages in the state; 19 (7) an estate or trust deriving income from sources in the state. 20 * Sec. 7. AS 43.20.040 is amended by adding a new subsection to read: 21 (d) With regard to the tax under AS 43.20.011(g), if a business, trade, or 22 profession, other than the rendering of purely personal services, is carried on partly 23 inside and partly outside the state, the income from sources in the state is determined 24 under AS 43.19 (Multistate Tax Compact). 25 * Sec. 8. AS 43.20 is amended by adding a new section to read: 26 Sec. 43.20.062. Credits against tax. (a) The amounts deducted and withheld 27 as taxes under this chapter during a calendar year are allowed as credits to the taxpayer 28 against the tax imposed by this chapter. 29 (b) A resident or part-year resident is allowed as a credit against the tax 30 otherwise due under this chapter the amount of income tax imposed on the taxpayer 31 for the taxable year by another state or territory of the United States on income derived 01 from sources in the other state or territory that is also subject to tax under this chapter. 02 However, the credit allowed in this subsection is limited to that proportion of the tax 03 computed under this chapter that the taxable income from the other state or territory 04 bears to total taxable income, and the credit may not exceed the actual tax paid to the 05 other state or territory. 06 (c) An individual or fiduciary is allowed as a credit against the tax otherwise 07 due under this chapter the amount of any real and personal property taxes paid by the 08 individual or the fiduciary to a municipality in this state under AS 29.45. 09 * Sec. 9. AS 43.20.065 is amended to read: 10 Sec. 43.20.065. Allocation and apportionment. A corporate taxpayer who 11 has income from business activity that is taxable both inside and outside the state or 12 income from other sources both inside and outside the state shall allocate and 13 apportion net income as provided in AS 43.19 (Multistate Tax Compact), or as 14 provided by this chapter. 15 * Sec. 10. AS 43.20 is amended by adding a new section to read: 16 Sec. 43.20.171. Collection of income at source. (a) Every employer making 17 payment of wages or salaries after December 31, 2004, shall deduct and withhold an 18 amount of tax computed in a manner to approximate the amount of tax due on those 19 wages under this chapter for that year. The employer shall remit withheld taxes to the 20 department, together with a return or report prescribed by the department, at the time 21 or times required by the department by regulation. The department shall publish the 22 rate of withholding required by this section. Every employer making a deduction and 23 a withholding shall furnish to the employee not later than January 31 of the succeeding 24 year, or within 30 days after termination of employment, whichever is earlier, a 25 written statement on a form prescribed by the department showing 26 (1) the name and taxpayer identification number of the employer; 27 (2) the name and social security number of the employee; 28 (3) the total amount of wages and other compensation; and 29 (4) the total amount deducted and withheld as tax. 30 (b) Every employer making payments of wages or salaries earned in the state, 31 regardless of the place where the payment is made, 01 (1) is liable for the payment of the tax required to be deducted and 02 withheld under this section and is not liable to an individual for the amount of the 03 payment; and 04 (2) shall make return of and pay to the department the amount of tax 05 levied that the employer is required to deduct and withhold under this chapter. 06 (c) An employer who fails to comply with this section is subject to the 07 penalties set out in AS 43.05.220(d). 08 (d) If the employer is the United States or the state or a political subdivision of 09 the state, or an agency or instrumentality of one or more of those entities, the return of 10 the amount deducted and withheld on wages or salaries may be made by an officer of 11 the employer having control of the payment of the wages or salaries or who is 12 appropriately designated for that purpose. 13 (e) In this section, "employee," "employer," and "wages" have the meanings 14 given to them under 26 U.S.C. (Internal Revenue Code). 15 * Sec. 11. AS 43.20.200(b) is amended to read: 16 (b) The same period of limitation upon the assessment and collection of taxes 17 imposed under this chapter and the same exceptions to it shall apply as provided in 26 18 U.S.C. 6501 - 6503 (Internal Revenue Code). In the case of additional tax due by 19 reason of a modification, recomputation, or determination of deficiency in a taxpayer's 20 federal income tax return, the period of limitation on assessment commences from the 21 date that the amended return [NOTICE] required in AS 43.20.030(d) is filed, and, if 22 no amended return [NOTICE] is filed, the tax may be assessed at any time. 23 * Sec. 12. AS 43.20.340 is amended to read: 24 Sec. 43.20.340. Definitions. In this chapter, 25 (1) "bank" means a financial institution, including a national banking 26 association; 27 (2) "corporation" includes an association, joint-stock company, and an 28 insurance company; 29 (3) [REPEALED 30 (4)] "fiscal year" means an accounting period of 12 months ending on 31 the last day of a month other than December; 01 (4) [(5) "INCLUDES" AND "INCLUDING" WHEN USED IN A 02 DEFINITION DO NOT EXCLUDE OTHER THINGS OTHERWISE WITHIN THE 03 MEANING OF THE WORD DEFINED; 04 (6)] "Internal Revenue Code" means the Internal Revenue Code of the 05 United States (26 U.S.C.) as the code exists now or as hereafter amended, as the code 06 and amendments apply to the normal taxes and surtax on net incomes, which 07 amendments are operative for the purposes of this chapter as of the time they became 08 operative or will become operative under federal law; 09 (5) [(7)] "part-year resident" means an individual who becomes a 10 resident or loses the status of a resident [ENTERS OR LEAVES THE STATE] 11 during the taxable year [AND WHO HAS RESIDED OR WAS DOMICILED IN THE 12 STATE FOR A PERIOD OF LESS THAN 12 MONTHS DURING THE TAXABLE 13 YEAR]; 14 (6) [(8)] "person" means an individual, a trust, an [OR] estate, a [OR] 15 partnership, or a corporation; 16 (7) [(9)] "taxable year" means the calendar year or the fiscal year 17 ending during the calendar year upon the basis of which the net income is computed 18 under this chapter; "taxable year" includes, in the case of a return made for a fractional 19 part of a year under this chapter, the period for which the return is made; 20 (8) [(10)] "taxpayer" means a person subject to a tax imposed by this 21 chapter; 22 (9) [(11)] "trade or business" includes the engaging in or carrying on of 23 a trade, business, profession, vocation, employment, and rendition of services or 24 commercial activity and includes the performance of the function of a public office. 25 * Sec. 13. AS 43.20.340 is amended by adding new paragraphs to read: 26 (10) "fiduciary" means an estate, trust, guardian, trustee, executor, 27 administrator, receiver, conservator, or a person acting in a fiduciary capacity for 28 another or for the estate of a deceased person; 29 (11) "individual" means a natural person, married or unmarried, adult 30 or minor, who is subject to the obligation to pay an income tax under 26 U.S.C. 31 (Internal Revenue Code); 01 (12) "nonresident" means an individual who is not a resident or part- 02 year resident; 03 (13) "resident" has the meaning given to the term "state resident" in 04 AS 43.23.095. 05 * Sec. 14. AS 43.05.085; AS 43.20.012, 43.20.013; and AS 47.45.120(a) are repealed.